Marine Cargo Insurance refers to the insurance of goods shipped from one place to another, anywhere in the world.

Coverage is usually effected on a “per voyage” basis that is from the time the goods leave the premises of the seller until the time they finally arrive at the buyer’s premises. There is no period specified in the policy.

Coverage can either be effected by the buyer or the seller depending on the contract of sales. There are different types of recognised Sale Contracts, the most common affecting Marine Insurance are:

F.O.B. (Free On Board)

It is the seller’s obligation to place the goods on board vessel at his own expense and obtain the Bill of Lading. He (the Seller) is also responsible for all loss or damage until goods are on board vessel. Thereafter the goods are at buyer’s risks.

C & F (Cost and Freight)

Seller provides goods with all freight and other charge paid to the port of discharge but does not include insurance charges. He (the Seller) is also responsible for the loss or damage to goods until delivery on to the carrying vessel but it is the responsibility of buyer to arrange insurance.

C.I.F. (Cost, Insurance & Freight)

The Seller undertakes to arrange and pay for all costs of delivering the goods and insurance up to final destination because the buyer has paid for these in the sale price. The insurance policy is assigned to the consignee and he can claim under the policy as though he had arranged the insurance himself.

Type of Marine Cargo Insurance Policies

1.Individual Policy

These are policies issued on each and every shipment upon request by the Assured.

2.Open Cover Policy

The Open Policy is a continuous policy that is issued on certain date and remains in force until cancelled. The policy provides automatic protection for all shipments described in the policy.

This arrangement is suitable for merchants who are engaged in regular import/export or internal trade.

Coverage in Marine Cargo Insurance

Shipment by vessel

Sending by air

Inland Transit

Sending by post or courier service

1.Shipment By Vessel

Types of coverage available are :

Institute Cargo Clauses ( C )

Institute Cargo Clauses ( B )

Institute Cargo Clauses ( A )

Institute Cargo Clauses ( C )

It covers loss of or damage to the interest insured attributable to :

fire or explosion

vessel being stranded, grounded, sunk or capsized

overturning or derailment of land conveyance

collision or contact of vessel with external object other than water

discharge of cargo at a port of distress

It also covers loss or damage to interest insured caused by :

General Average Sacrifice

Jettison

Note :

General Average arises where a sacrifice is incurred in connection with a venture with a view to saving or minimizing the loss as a whole. This means that some of the cargo needs to be sacrificed in order to save others. There is liability resting upon the owners of cargo to contribute towards the damages or expenses suffered by those whose cargoes are sacrificed.

Institute Cargo Clauses ( B )

In addition to coverage provided under “C” policy, it also covers loss or damage to goods insured attributable to earthquake, volcanic eruption or lightning and loss of or damage to interest insured by :

entry of sea, lake or river water into vessel

total loss of any package lost overboard or dropped whilst loading on to, or unloading from vessel

Institute Cargo Clauses ( A )

It covers all fortuitous losses of every description but excludes loss, damage or expense proximately caused by delay, inherent vice or nature of the goods.

Marine Hull Insurance covers loss or damage to hull and machinery. The hull is the structure of the vessel. Machinery is the equipment that generates the power to move the vessel and control the lighting and temperature system such as boiler, engine, cooler and electricity generator.

Scope of Cover

Institute Time Clauses

These are the main clauses and most important in Marine Hull policies. Time Clauses covers for a specific period usually 12 months. As the nature and degree of risks which the Insurer run vary according to the kind of vessel, there exist a number of categories in the Time Clauses. They are : –

Institute Time Clauses (Hull)

Institute Time Clauses (FPA)

Institute Time Clauses (Total Loss Only)

1.Institute Time Clauses (Hull)

Provides the maximum coverage offered by hull insurance.

Perils Covered

1.Perils of the sea

2.Fire & explosion

3.Violent theft

4.Piracy

5.Breakdown of accident to nuclear installations etc.

6.Contact with aircraft

7.Earthquake, volcanic eruptions or lightning

8.Accidents in loading etc.

9.Bursting of boilers

10.Breakage of shaft

11.Latent of defect

12.Negligence of masters etc.

13.Negligence of repairers etc.

14.Negligence of charterers etc.

15.Barratry

Excluded Perils

1.Wilful misconduct of the Assured

2.Loss caused by delays

3.Wear and tear

4.Rats and/or vermin

5.Injury to machine not proximately caused by maritime peril

Paramount Exclusions in the Policy

1.War

2.Strikes

3.Malicious acts

4.Nuclear exclusion

Other Losses & Expenses Covered

1.Pollution Hazard

2.3/4th Collision Liability

3.General Average and Salvage

4.Sue and Labour

5.Constructive Total Loss

2.Institute Time Clauses (FPA)

The coverage of these clauses are similar to that of Hulls Clauses but exclude coverage on machinery damages in all respects. It is advised that all vessels which exceed 15 years of age or older, if the risk accepted, to give this coverage only. Past experience shows that older vessels suffer serious casualties due to machinery damage. If machinery damage is excluded due to limitation of this clause, there is a better chance of making hull underwriting profit.

3.Institute Time Clauses Hulls (Total Loss Only)

As the name suggested, this clause only covers in the event of it becoming a total loss by arrangement, actual, compromised or constructive total loss. The rate for this cover is low and usually this cover is only extended to old vessel (but not more than 20 years) or on accommodation only.

Institute Yacht Clauses

This clause are basically Institute Hull clauses amended for yachts and include all damages to hull, masts, spars, sails and other equipment on board the yacht but does not include damage whilst the yacht is racing.

Caution should be taken with regard to charter yachts and if the risk is accepted, the following warranty must be included into the policy conditions, namely:

‘Warranted that professional skipper & crew is in attendance at all times’

Full details of the Skipper and Crew’s experience must be obtained.

Institute Voyage Clauses

This insurance covers risks during a voyage from one port or place to another or a round voyage. In so far as ordinary vessels are concerned, as most of them are usually insured under a time policy, voyage insurance is effected only in such cases as delivery voyage of a new vessel to buyer from the shipyard or a voyage of a vessel to be repaired at shipyard. The period of coverage is usually less than a year and the scope of coverage is almost identical that of time policy. In which case, there are also the FPA and Total Loss cover.

Builders’ Risk Insurance

This type of insurance covers whilst vessel is under construction. During that period, it is exposed to risks such as fire, tidal wave, capsize or failure in launch. It is also exposed to collision and sinking on a trial trip. The builder’s risk insurance effected by shipyards provides cover against all such risks. The insured value is the contract price or the estimated completed value of the vessel if there is no contract price. The period of insurance should be from the time of inception of the construction to the time of delivery. Hence, the period can well exceed 12 months.

Hull War And Strike Risks Insurance

War and strike risks are usually excluded from the cover of ordinary marine insurance policies in any market throughout the world. This insurance covers exclusions under Article 11 of the Institute Time Clauses. It can only be effected on vessels which are insured against ordinary marine risks. The rate of premium fluctuates frequently reflecting the climate of world politics at the time of inception of the risk.

Terrorism Insurance

Terrorism cover is an excluded risk worldwide. There will be no consideration for acceptance if this coverage is required.

Loss of Time Insurance

This insurance indemnifies a ship owner for loss of anticipated profits or operating costs where the insured vessel is forced to be out of commission in consequence of damage caused by maritime accident. The period of insurance is one year and the insurable value is calculated based on the following: –

estimated operating costs

estimated chartering to be earned

estimated gross income of freight

The loss of time is covered on the basis of the number of days required for the completion of the repairs, counting from the day following the day of the accident. The Insurer’s liability per any one accident is limited to certain number of days up to 180 days throughout the year.